Bishkek Fuel-Supply Corruption Probe Focusing on Maxim Bakiyev

Kyrgyzstan’s General Prosecutor’s Office is focusing its corruption investigation concerning fuel supplies at Manas Transit Center on companies allegedly controlled by Maxim Bakiyev, the son of ousted president Kurmanbek Bakiyev.

Kyrgyz prosecutors are investigating six local suppliers that provided TS-1 jet fuel to Mina Corp and Red Star Enterprises Ltd., two entities that have held fuel supply contracts for Manas operations. Manas is a key logistics hub for US and NATO military operations in Afghanistan. [For background see EurasiaNet archive].

According to an April 30 statement released by the General Prosecutor’s Office, the six Kyrgyz entities are suspected of having engaged in fraudulent practices to evade paying roughly $90 million in excise taxes over the past five years, a period that coincides with former president Bakiyev’s tenure in power. [For background see EurasiaNet archive].

“It should be noted that all of the above companies belong to Maxim Bakiyev,” the statement added. Bakiyev, the former head of the Kyrgyz Central Agency for Development, Investment and Innovation, was in Washington, DC, when unrest erupted in Bishkek in early April, resulting in his father’s ouster. Kyrgyzstan’s provisional leadership has authorized a warrant for Maxim’s arrest. His current whereabouts have not been independently verified. [For background see EurasiaNet archive].

According to Kyrgyz prosecutors, the elder Bakiyev allegedly engineered parliamentary changes in tax regulations that were purportedly tailored to benefit his son’s commercial interests.

In 2004, a draft law was introduced to set the excise rate on jet fuel at 2,000 soms [about $50] per ton, the General Prosecutor’s Office’s statement said.

“However, despite this and in order to obtain benefits for the individuals concerned, the Kyrgyz Parliament adopted, and the President of the Kyrgyz Republic signed, an Act which states that since 2005 excise tax on imports of jet fuel is set at a zero rate,” the statement said.

According to the US government’s Federal Procurement Data System (FPDS) website, Mina Corp obtained the latest Manas fuel contract worth up to $730.9 million on July 29, 2009, to supply fuel to Manas under a no-bid contract. The justification cited was the “national security” clause of the Federal Acquisition Regulations system.

Under the terms of the Manas Transit Center agreement, both Red Star and Mina Corp are exempt from Kyrgyz customs and taxes. Article 7 of the agreement signed last year states; “purchases of goods and services in the Kyrgyz Republic by the US government or on its behalf to implement this agreement are not subject to any taxes, customs fees and similar payments on the territory of the Kyrgyz Republic.”